If you had to be honest about what’s in your bank account right now, could you cover a surprise bill totaling more than $500?
A new report from Bankrate says that six in 10 Americans couldn’t.
In fact, only 41 percent of U.S. residents report having enough money in savings to cover a bill of that size. About 20 percent said they’d pay the bill with a credit card, and the same number said they’d cut other spending to make it work. Only 11 percent would — or could — turn to friends and family for help.
Surprisingly, that number is an improvement. Last year at this time, only 37 percent of Americans could’ve dealt with a surprise bill of $500 or more.
Who’s most prepared? Millennials. Forty-seven percent of them said they could deal with the expense with money from their savings accounts.
What’s worse is that most people will face a surprise bill like this each year.
“If you are human, have a pet, kids, a house or a place to live, something is going to happen that will cost you money,” says Jill Cornfield, a retirement analyst at Bankrate.
Creating a “cash cushion” isn’t easy, but Cornfield thinks it can be done — even for families who are living paycheck-to-paycheck.
“There are ways to track your spending and look where your money is going and find the holes and gaps. There are places you can cut back: daily coffee, alcohol, vacations, some people take several vacations, maybe cut back on one,” says Cornfield.
Sure, that’s great… unless you aren’t already spending your money on those things.
Some experts suggest envelope budgeting, creating a hierarchy of spending, and cutting out things you think are necessities but aren’t (like cable T.V.). The New York Daily News offers up a list of “Foods to Buy When You’re Broke,” but again, if you’re not making enough money to pay the bills, these are all off the table.
What Do You Think?